Credit counsellors share consumers' biggest credit card mistakes

By Emma Lunn

We all make mistakes. Credit cards make
it extra easy to do so, with their tempting rewards and their buy-now-pay-later
appeal. And it is the most common mistakes we make with our plastic that are
the most avoidable.

National Debtline, part of the
Money Advice Trust, offers free and independent debt advice to people across
the UK. As a result, its counsellors have seen their fair share of credit blunders.

We asked National Debtline spokesman
Paul Crayston to poll the organization's counsellors for the biggest errors consumers
make with credit cards. Here are the top 3 mistakes -- and how to avoid making
them.

Paying
for essential living expenses Using your card for planned purchases
and paying off the balance on time is a good way to build a healthy credit
standing. Using your card in
desperation to pay for living expenses like food, energy bills or housing
costs? That's often the first step towards problem debt.

"It is crucial not to become
reliant on credit," Crayston says. "Paying for essential things on
credit cards -- if not being done for the rewards and being managed carefully --
can be a sign of real financial difficulty."

Remedy:
"If you are in this situation, you
need to work out a complete budget sheet for your finances to see if your
income matches your essential expenditure," Crayston says.

Making a budget can help you to be more
effective with your spending -- but you have to be realistic and create a
budget you can stick to. If your income isn't covering your essential expenses,
give National Debtline -- or another free independent debt advice service -- a
call.

Borrowing
to pay off existing debts
While borrowing more money to pay off existing debts is not always a mistake,
doing so without consulting an expert is, according to Crayston.

"Whilst this can, on occasion, be a
good solution to debt problems, that is rarely the case and there are usually
far better options available," Crayston says. "Borrowing to pay off
debt is a risky business, and not something to enter into lightly."

Remedy:
If you're in debt, taking out further credit agreements will probably mean
either expensive interest charges or paying off the debt for a longer time
period. Instead, sit down and work out how you can increase
your income or reduce your spending and use the extra money to repay your
existing debts without having to take on more debt.

Being
lured into an expensive card deal by an initial offer
Credit cards with enticing sign-up bonuses, tempting low introductory interest
rates and attractive
rewards might make you want to get a new piece of plastic. Yet if not used
responsibly, these cards can end up costing you dearly in the form of fees and
penalty interest rates.

"Gladly this is something that
regulators have been cutting down on," Crayston says. "But there are
still plenty of organisations offering relatively expensive credit card deals
with an enticing offer for signing up. It is important to recognise that if you
don't manage your card spending carefully, then the value of the offer will be
quickly outweighed by the interest payments on the debt."

Remedy:
Store cards are one area where a tempting initial offer -- such as money off
the first purchase -- can persuade a shopper to sign up for an expensive credit
card. So avoid these cards or use them wisely by taking advantage of the
promotion, paying off the debt on the card and then not using it again. Better
yet, shop around for a credit card that will meet your needs over the
longer-term rather than just for short-term gain.